Battling Over Music

Tuesday, 2003-09-30; 00:24:00

Can Apple keep its competitors at bay with the iPod and iTunes?

(Originally posted on AppleXnet)

Last April, Apple introduced what all of us rumormongers knew was imminent: the iTunes Music Store (iTMS, for short). The shiny, newfangled, easy-to-use service was released to the world, with much fanfare. Steve Jobs touted the iTMS along with the iPod as the first complete music solution: acquisition, management, and listening could all be performed seamlessly, since it was coming from one vendor, and the one that everyone knows has pioneered ease of use in the computer industry.

We all know how it turned out. Given its small market, Mac users who were also U.S. residents and had a recent enough computer to run Mac OS X 10.1.5 or later, the iTMS was a huge success. Clocking in at one million downloads in the first week (and ten million at last count), Apple proved to the world and to the draconian record labels that a download music service is a viable model. It offers many benefits over a traditional music store: a user can search and preview any track on any CD from the comfort of his own home at any time of the day or night; the user can quickly search for a specific song or artist (try doing that in a regular record store); a user can easily see what songs other iTMS also like based on a specific album or song; and, the user can access exclusive tracks only available through the iTMS and never released before. Granted, the iTMS will probably not replace traditional music stores anytime soon, but for those of us who are ready to jump into the digital age, the iTMS fits the bill as a great music download service.

Previously, the five major record labels held back the rights of the songs so that playing them in your car or on your portable music player was a hassle, and didn't make music downloads worth it over buying a traditional CD. But Apple somehow managed to negotiate with the major record labels to get a broad set of rights to the music so that you can enjoy it anywhere you go.

Today, we're five months past the launch of the iTMS. And this week, the iTMS got its first major competitor on the Windows side of the fence, notwithstanding (500,000 downloads a day, my foot -- keep on deluding yourself, Scott Blum!). Ironically, this download service is from MusicMatch.

Apple was the first major music download service available, and everybody hailed it as a new age in music. The problem, however, is that even though Apple has been without a solid competitor for almost half a year, the iTMS is in danger of becoming irrelevant, on the basis of the music format.

If you haven't seen any pictures of the MusicMatch music store, go to the MusicMatch website and check it out. Just from the picture on the front page, it seems eerily familiar to the iTMS. It seems that you can browse by genre, you can preview, and you can download both tracks and albums. Supposedly, this service has just about the same usage rights as the iTMS: you can play the songs on unlimited portable music players, you can burn it to unlimited CDs, provided that you change the playlist every 5 burns (in contrast to 10 burns with iTunes), and you can play the music on up to 3 personal computers. So if it's as easy to use as the iTMS as it appears to be, what advantage does the iTMS have?

Apple's iTMS probably still has a better execution. Many people have berated MusicMatch as being ugly and a horrible application, and I, personally, can't vouch to that. I can say that Apple usually implements ideas better than the competition on the Windows side of the fence, and no doubt this probably applies here. MusicMatch also requires you to pay $20 for the "pro" version -- from what I hear, iTunes has all these "pro" features built-in, and it's free, to boot.

The main, fundamental difference between the two services, however, is the music format. MusicMatch downloads come in WMA format, whereas Apple's iTMS downloads come in AAC format.

I don't pretend to know which format is better or which format is cheaper. AAC, while being an open standard, still has licensing fees attached to it. Remember the big brouhaha a year and a half ago when Apple delayed the release of QuickTime 6 because of licensing issues with the MPEG4 codec? Well, AAC is the audio portion of that codec. WMA is Microsoft's audio codec. We all know that Microsoft is going to be lobbying everybody who makes music software for Windows to use the WMA format, so that Microsoft can have yet another monopoly on yet another market.

And while Apple had a 5-month head start to push AAC onto the market, the small, limited Mac user base is not enough. MusicMatch (and, if you still remember that sordid operation), both offer their music in WMA audio, and they already cater to a larger audience. MusicMatch has the potential to have a much bigger effect on the music market, and therefore has a much greater potential to put a roadblock in the way of AAC adoption.

The problem with the WMA format is that it is not an open standard, mainly because it was pioneered by Microsoft. And that alone will have a detrimental effect on the download music industry, if the WMA format becomes the dominant one. The reason is that Microsoft has the ability to do anything they want with that music format, and their DRM has the potential to lock the market into Microsoft's format. Imagine, if you will, a user who purchases 50 or 100 CDs from MusicMatch. Since it's in WMA format, you're at the mercy of Microsoft's whims to do whatever you want with that music. And what if you're not allowed to convert to a different music format? That would mean that, at this point, it would be a bad choice to buy an iPod since it doesn't play WMA music files.

While the same can be said for AAC, because Apple has created its own FairPlay DRM mechanism, having AAC be an open codec means that Apple can't lock up the music format like Microsoft can. Apple could prevent you from converting your iTMS music to another format just like Microsoft, but AAC is based on open DRM standards, which prevents Apple fundamentally changing the AAC music format so that you can't play it on other computers or portable music players that can also play AAC music.

We also can't discount the obvious: Microsoft will be Microsoft. Microsoft naturally wants to dominate any market, and it will strive to achieve that domination whether through legal or illegal means. And when it does, Microsoft is more likely to abuse that monopoly. Given that Apple rarely holds a monopoly in any market, it would likely want to retain the loyalty of that monopoly rather than anger it by abusing that monopoly.

So Apple is in a tight situation. Most likely it wasn't able to release a Windows version of the iTMS at the same time that the Mac version was announced, because the five major music labels wanted to test the music service waters before allowing broad usage rights to every computer user. Now that it looks like the labels have finally gotten their heads out of the ground and are ready to cooperate, Windows music services are popping up all over the place, and Apple's isn't the first. If Apple's Windows version of the iTMS isn't far behind, these Windows services stand to gain a lot of ground for the WMA camp.

Apple has two things going for it: the iPod, and iTMS awareness. The portable music player market is one of the rare markets where Apple enjoys over 50% market share, and that's all thanks to the iPod. Apple has steadily upgraded and improved the iPod, decreasing the size, even while increasing capacity and features. It's been a hit. The iTMS has been covered all over the press and has largely received positive reviews, with pundits lauding its ease of use and its unrestrictive usage rights. Since Apple has dominated these markets up until now (and hopefully will continue to do so), Apple is a force to be reckoned with in the AAC versus WMA fight. MusicMatch's downloadable music won't work on the number one portable music player on the market -- the iPod.

Will the combination of the iPod's market share as well as the iTMS' mind share be enough to counter the onslaught of Windows download music services? Or will someone like Dell be able to successfully elbow its way into the market with its rebranded MP3 player and rebranded music store, just because of ITS brand awareness? Apple, for the moment, probably has the edge. John Gruber, one of my favorite freelance writers about many things Macintosh, seems to agree.

But one thing's for sure: if Apple wants to continue to be the king of the hill in music services and portable music players, it needs to release a Windows version of the iTMS soon. VERY soon. Not only do Apple's profits hang in the balance, but a fundamental battle is being waged against proprietary formats: AAC vs. WMA. Let's hope Apple doesn't get relegated to the 5% market share it currently has in computers. Apple has a chance to completely shape an entirely new market, and hopefully they're not just sitting around.

And where's the irony? For those people who use iPods on Windows, guess what software they use? Nope, not iTunes -- that hasn't been ported to Windows yet. Yes, that's right: MusicMatch is the Windows software included with the iPod. Who knows how Apple's Windows customers will react when they can't play their MusicMatch music downloads in their iPod? After all, MusicMatch was PROVIDED with the iPod.

So just how much crazier can this market get? Well, get ready to brace yourselves, because a flood of other music download services are getting ready to launch. Hopefully the iTMS can survive it.

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